215 ILCS 5/ Illinois Insurance Code.

(215 ILCS 5/166) (from Ch. 73, par. 778)

Sec. 166. Effect of merger or consolidation.

(1) If the surviving or new company is a domestic company, when such merger or consolidation has been effected

(a) the several companies parties to the agreement of merger or consolidation shall be a single company, which, in the case of a merger, shall be that company designated in the agreement of merger as the surviving company, and in the case of a consolidation, shall be the new company provided for in the agreement of consolidation;

(b) the separate existence of all of the companies parties to the agreement of merger or consolidation, except the surviving company in the case of a merger, shall cease;

(c) such surviving or new company shall have all of the rights, privileges, immunities and powers and shall be subject to all of the duties and liabilities granted or imposed by this Code;

(d) such surviving or new company shall thereupon and thereafter possess all the rights, privileges, immunities, powers and franchises of a public as well as of a private nature, of each of the companies so merged or consolidated; and all property, real, personal and mixed, and all debts due on whatever account, including subscriptions to shares, assessments payable from members or policyholders, and all other choses in action and all and every other interest of, or belonging to or due to, each of the companies so merged or consolidated shall be deemed to be transferred to and vested in such surviving or new company without further act or deed; and the title to any real estate, or any interest therein, under the laws of this State vested in any of such companies shall not revert or be in any way impaired by reason of such merger or consolidation;

(e) such surviving or new company shall thenceforth be responsible and liable for all the liabilities and obligations of each of the companies so merged or consolidated; any claim existing or action or proceeding pending by or against any of such companies may be prosecuted to judgment as if such merger or consolidation had not taken place, or such surviving or new company may be substituted in its place; neither the rights of creditors nor any liens upon the property of any of such companies shall be impaired by such merger or consolidation, but such liens shall be limited to the property upon which they were liens immediately prior to the time of such merger or consolidation, unless otherwise provided in the agreement of merger or consolidation; and

(f) in case of a merger, the articles of incorporation of the surviving company shall be supplanted and superseded to the extent, if any, that any provision or provisions of such articles shall be restated in the agreement of merger as provided in section 158, and such articles of incorporation, shall be deemed to be thereby and to that extent amended; in case of a consolidation, the statements set forth in the agreement of consolidation as provided in section 158 shall be deemed to be articles of incorporation of the new company formed by such consolidation.

(2) If the surviving or new company is a foreign or alien company, when such merger or consolidation has become effective in this State

(a) the effect of the merger or consolidation shall be determined by the law of the state of incorporation or organization of such company;

(b) the separate existence of all domestic companies parties to the plan of merger or consolidation shall cease;

(c) all property, real, personal, and mixed, and all debts due on whatever account including subscriptions to shares, assessments payable from members or policyholders and all other choses in action and all and every other interest of or belonging to and due to each of the companies so merged or consolidated shall be taken and deemed to be transferred to and vested in such surviving or new company without further act or deed, and the title to any real estate, or any interest therein, shall not revert or be in any way impaired by reason of such merger or consolidation.

(3) In the event of a merger or consolidation under this article, the surviving company or the consolidated company shall be considered as having the age of the oldest company which is a party to such merger or consolidation for the purpose of complying with requirements of the laws relating to age of company.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/167) (from Ch. 73, par. 779)

Sec. 167. Rights of dissenting shareholders of domestic company.

(1) If a shareholder entitled to vote of (a) a domestic company which is a party to a merger or consolidation or (b) a domestic insurance company to be acquired under a plan of exchange files with such company, prior to or at the meeting of shareholders at which the agreement of merger or consolidation or plan of exchange is submitted to a vote, a written objection to such agreement or plan, and does not vote in favor thereof, and such shareholder, within 20 days after the merger or consolidation or plan of exchange has become effective in this State makes written demand on the surviving or new company or on the domestic insurance company to be acquired under a plan of exchange for payment of the fair value of his shares as of the day prior to the date on which the vote of shareholders was taken approving the merger or consolidation or plan of exchange, such surviving or new company or domestic insurance company shall pay to such shareholder upon surrender of his certificate or certificates representing such shares, the fair value thereof. Any shareholder who makes such objection and demand shall cease to be a shareholder and shall have no rights with respect to such shares except the right to receive payment therefor. If within 30 days after the effective date, the value of such shares is agreed upon between the shareholder and the surviving or new company or the domestic insurance company to be acquired under a plan of exchange, as the case may be, and such agreement is approved in writing by the Director, payment therefor shall be made within 90 days after the effective date. If within 30 days after the effective date the surviving or new company or the domestic insurance company to be acquired under a plan of exchange, as the case may be, and the shareholders do not so agree, or any agreement as to value is not approved in writing by the Director, either such company or the shareholder may, within 90 days after the effective date, petition the circuit court of the county in which the principal office of the surviving or new company or domestic insurance company is located, to appraise the value of such shares. In the event the surviving or new company has no office in this State, then such petition may be filed in the circuit court of the county in which the principal office of the company in which such shareholder holds shares was located, immediately prior to such merger or consolidation. A copy of the petition shall be delivered or mailed by registered mail to the Director within 5 days after the filing thereof and proof of such delivery or mailing shall be filed with the court. The Director has the right to appear through the Attorney General and be heard upon all questions and issues in the proceeding. The practice, procedure and judgment in the circuit court upon such petition shall be the same, so far as practicable, as that under the eminent domain laws in this State.

(2) Payment of the appraised value of such shares shall be made within 60 days after the entry of the judgment or order finding such appraised value and the judgment shall be payable only upon and simultaneously with the surrender to the surviving or new company or the domestic insurance company to be acquired under a plan of exchange of the certificate or certificates representing such shares. The right of a dissenting shareholder to be paid the fair value of his shares as herein provided shall cease if and when the Director revokes the approval to the merger or consolidation, as provided in Section 168, or if the merger or consolidation or plan of exchange be abandoned.

(3) Every shareholder who did not vote in favor of such merger or consolidation or plan of exchange and who does not object in writing and demand payment of the value of his shares at the time and in the manner aforesaid, or does not file a petition within the time herein limited, is conclusively presumed to have assented to such merger or consolidation or plan of exchange and shall be bound by the terms thereof.

(4) All shares of dissenting shareholders so acquired by a domestic insurance company party to a plan of exchange shall be cancelled by the board of directors of such company upon the plan of exchange becoming effective or at any time thereafter, and the capital stock of the company shall be decreased in accordance with Section 33.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/168) (from Ch. 73, par. 780)

Sec. 168. Rights of dissenting policyholder of domestic company.

(1) If not less than five per centum of all the policyholders in any domestic company who were entitled to vote with respect to any merger or consolidation and who did not vote in favor of such merger or consolidation at the meeting at which the agreement of merger or consolidation was adopted by the policyholders of such company, or if not less than five per centum of the members of any domestic fraternal benefit society party to a merger or consolidation shall file, at any time within thirty days after the agreement of merger or consolidation is effected, a petition with the Director for a hearing upon such agreement of merger or consolidation, the Director shall order a hearing upon said petition, fix the time and place of such hearing, and give written notice to the companies that are parties to the merger or consolidation, at least fifteen days before the date of such hearing. Any member or policyholder so petitioning may appear before the Director at such hearing, either in person or by an attorney, and be heard with reference to said agreement. If, upon such hearing being had, the Director finds that the interests of the members or policyholders, as the case may be, of such company are not properly protected, or if he finds that any reasonable objection exists to such agreement, he shall enter an order revoking the approval already given, and the agreement of merger or consolidation shall, thereupon, become null and void.

(2) The Director shall have like power to revoke any approval of any such agreement if any officer, director or employee of any company party to such agreement shall, after reasonable notice, fail or refuse without reasonable cause to attend and testify at such hearing, or to produce any books or papers called for by said Director.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/169) (from Ch. 73, par. 781)

Sec. 169. Rights of dissenting shareholders and policyholders of foreign or alien company.

The rights of any dissenting shareholder, member or policyholder of any foreign or alien company party to a merger or consolidation, shall be those afforded to such shareholder, member, or policyholder by the laws of the domiciliary state or country of such foreign or alien company.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/169.1) (from Ch. 73, par. 781.1)

Sec. 169.1. Effect of exchange under plan of exchange.

(1) Upon a plan of exchange becoming effective, the exchange provided for therein is considered to have been consummated and each shareholder of the domestic stock insurance company acquired ceases to be a shareholder of such company. The ownership of all shares of the issued and outstanding stock of such company, except shares payment of the value of which is required to be made by such company under Section 167, vests in the acquiring corporation automatically without any physical transfer or deposit of certificates representing such shares. All shares payment of the value of which is required to be made by such company under Section 167 are considered no longer outstanding shares of such company. The acquiring corporation thereupon becomes the sole shareholder of such domestic stock insurance company and has all the rights, privileges, immunities and powers and, except as otherwise provided herein, is subject to all of the duties and liabilities to the extent provided by law of a shareholder of an insurance company organized under the laws of this State.

(2) Certificates representing shares of the domestic insurance company to be acquired prior to the plan of exchange becoming effective, except certificates representing shares payment of the value of which is required under Section 167, shall after the plan of exchange becomes effective, represent (a) shares of the issued and outstanding capital stock or other securities issued by the acquiring corporations and (b) the right, if any, to receive cash or other consideration upon such terms as are specified in the plan of exchange. However, the plan of exchange may specify that all such certificates shall after the plan of exchange becomes effective represent only the right to receive shares of stock or other securities issued by the acquiring corporation, or cash or other consideration or any combination thereof upon such terms as are specified in the plan of exchange.

(Source: Laws 1967, p. 2406.)

(215 ILCS 5/169.2) (from Ch. 73, par. 781.2)

Sec. 169.2. Acquiring and acquired corporations under a plan of exchange to be separate.

The domestic stock insurance company acquired under a plan of exchange and the acquiring corporation are in all respects separate and distinct corporations, with neither corporation having any liability to the creditors or policyholders, if any, or shareholders of the other, for any acts or omissions of the officers, directors or shareholders of either or both of such corporations.

(Source: Laws 1967, p. 2406.)

(215 ILCS 5/170) (from Ch. 73, par. 782)

Sec. 170. Transfer of deposits.

(1) If the surviving or new company shall be a foreign or alien company and the laws of the state or country under which such surviving or new company is incorporated or organized shall require the maintenance with any official of such State or country of a deposit of the legal reserve on any policies, then the Director is authorized to deliver to the proper custodian of such deposits of such state or country any deposits theretofore made with the Director pertaining to policies of any of the merged or consolidated companies. If the surviving or new company shall be a domestic company into which has been merged or consolidated a foreign or alien company incorporated or organized in a state or country the laws of which require the maintenance with an official of a deposit of the legal reserve on any policies, then the Director is hereby authorized to receive from such official any deposit theretofore made with such official pertaining to the policies of any of the merged or consolidated companies.

(2) Any surviving or new company shall, within 60 days after the transfer of such deposit, notify the holder of every policy secured by such transferred deposit, that the transfer has been made. The president or vice-president and secretary or assistant secretary of such company, or the executive officers corresponding thereto, shall within 30 days thereafter, file with the Director an affidavit of the fact that due notice to policyholders, as provided for herein, has been given. If a surviving or new company shall be a foreign or alien company, the Director shall require from such company, before transferring any deposit to any official of the state or country under the laws of which such foreign or alien company is incorporated or organized, a written agreement that notice of such transfer will be given to policyholders and that an affidavit with regard to such notice will be furnished to the Director as in this section provided.

(3) In the event any deposit is to be maintained in this State by reason of this section, the amount thereof from time to time for each such policy shall be at least equal to the amount which would be required in the state where such deposit was theretofore maintained under the provisions of the law of such state in effect on the date the merger or consolidation was effected. The deposits so maintained in this State shall consist of securities of the kinds authorized for investment by Article VIII of this Code.

(Source: Laws 1959, p. 1431.)

(215 ILCS 5/171) (from Ch. 73, par. 783)

Sec. 171. Certificates of fees and commissions paid.

Whenever agreements of merger or consolidation or plans of exchange are filed with the Director, there shall also be filed a certificate executed by the president or a vice-president and attested by the secretary or an assistant secretary, or the executive officers corresponding thereto, and under the corporate seal of each of the companies party to the agreement of merger or consolidation or plan of exchange, verified by the affidavits of such officers, setting forth all fees, commissions or other compensations, or valuable considerations paid or to be paid, directly or indirectly, to any person in any manner securing, aiding, promoting or assisting in any such merger or consolidation or plan of exchange.

(Source: Laws 1967, p. 2406.)

(215 ILCS 5/172) (from Ch. 73, par. 784)

Sec. 172. Payment of fees to officer or director prohibited.

(1) No director or officer of any company party to a merger or consolidation or plan of exchange, except as fully expressed in the agreement of merger or consolidation or plan of exchange shall receive any fee, commission, other compensation or valuable consideration whatever, directly or indirectly for in any manner aiding, promoting or assisting in such merger or consolidation or plan of exchange.

(2) Any person violating the provisions of this Section shall be guilty of a Class A misdemeanor.

(Source: P.A. 77-2699.)

(215 ILCS 5/Art. XI heading) ARTICLE XI. REINSURANCE

(215 ILCS 5/173) (from Ch. 73, par. 785)

Sec. 173. Reinsurance authorized.

(a) Subject to the provisions of this Article, any domestic company may, by a reinsurance agreement, accept any part or all of any risks of the kind which it is authorized to insure and it may cede all or any part of its risks to another solvent company having the power to make such reinsurance. It may take credit for the reserves on such ceded risks to the extent reinsured subject to the exceptions provided in Sections 173.1 through 173.5.

(b) The purpose of this Article is to protect the interest of insureds, claimants, ceding insurers, assuming insurers, and the public generally. The legislature hereby declares its intent is to ensure adequate regulation of insurers and reinsurers and adequate protection for those to whom they owe obligations. In furtherance of that State interest, the legislature hereby provides a mandate that upon the insolvency of a non-U.S. insurer or reinsurer that provides security to fund its U.S. obligations in accordance with this Article, the assets representing the security shall be maintained in the United States and claims shall be filed and valued by the state insurance official with regulatory oversight, and the assets shall be distributed in accordance with the insurance laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic U.S. insurance companies. The legislature declares that the matters contained in this Article are fundamental to the business of insurance in accordance with 15 U.S.C Sections 1011 through 1012.

(Source: P.A. 90-381, eff. 8-14-97.)

(215 ILCS 5/173.1) (from Ch. 73, par. 785.1)

Sec. 173.1. Credit allowed a domestic ceding insurer.

(1) Except as otherwise provided under Article VIII 1/2 of this Code and related provisions of the Illinois Administrative Code, credit for reinsurance shall be allowed a domestic ceding insurer as either an admitted asset or a deduction from liability on account of reinsurance ceded only when the reinsurer meets the requirements of paragraph (A), (B), (B-5), (C), (C-5), (C-10), or (D) of this subsection (1). Credit shall be allowed under paragraph (A), (B), or (B-5) of this subsection (1) only as respects cessions of those kinds or classes of business in which the assuming insurer is licensed or otherwise permitted to write or assume in its state of domicile, or in the case of a U.S. branch of an alien assuming insurer, in the state through which it is entered and licensed to transact insurance or reinsurance. Credit shall be allowed under paragraph (B-5) or (C) of this subsection (1) only if the applicable requirements of paragraph (E) of this subsection (1) have been satisfied.

(A) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is authorized in this State to transact the types of insurance ceded and has at least $5,000,000 in capital and surplus.

(B) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is accredited as a reinsurer in this State. An accredited reinsurer is one that:

(1) files with the Director evidence of its submission to this State's jurisdiction;

(2) submits to this State's authority to examine its books and records;

(3) is licensed to transact insurance or reinsurance in at least one state, or in the case of a U.S. branch of an alien assuming insurer is entered through and licensed to transact insurance or reinsurance in at least one state;

(4) files annually with the Director a copy of its annual statement filed with the insurance department of its state of domicile and a copy of its most recent audited financial statement; and

(5) maintains a surplus as regards policyholders in an amount that is not less than $20,000,000 and whose accreditation has been approved by the Director.

(B-5)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that is domiciled in, or in the case of a U.S. branch of an alien assuming insurer is entered through, a state that employs standards regarding credit for reinsurance substantially similar to those applicable under this Code and the assuming insurer or U.S. branch of an alien assuming insurer:

(a) maintains a surplus as regards policyholders in an amount not less than $20,000,000; and

(b) submits to the authority of this State to examine its books and records.

(2) The requirement of item (a) of subparagraph (1) of paragraph (B-5) of this subsection (1) does not apply to reinsurance ceded and assumed pursuant to pooling arrangements among insurers in the same holding company system.

(C)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that maintains a trust fund in a qualified United States financial institution, as defined in paragraph (B) of subsection (3) of this Section, for the payment of the valid claims of its United States policyholders and ceding insurers, their assigns and successors in interest. The assuming insurer shall report to the Director information substantially the same as that required to be reported on the NAIC annual and quarterly financial statement by authorized insurers and any other financial information that the Director deems necessary to determine the financial condition of the assuming insurer and the sufficiency of the trust fund. The assuming insurer shall provide or make the information available to the ceding insurer. The assuming insurer may decline to release trade secrets or commercially sensitive information that would qualify as exempt from disclosure under the Freedom of Information Act. The Director shall also make the information publicly available, subject only to such reasonable objections as might be raised to a request pursuant to the Freedom of Information Act, as determined by the Director. The assuming insurer shall submit to examination of its books and records by the Director and bear the expense of examination.

(2)(a) Credit for reinsurance shall not be granted under this subsection unless the form of the trust and any amendments to the trust have been approved by:

(i) the regulatory official of the state where the trust is domiciled; or

(ii) the regulatory official of another state who, pursuant to the terms of the trust instrument, has accepted principal regulatory oversight of the trust.

(b) The form of the trust and any trust amendments also shall be filed with the regulatory official of every state in which the ceding insurer beneficiaries of the trust are domiciled. The trust instrument shall provide that contested claims shall be valid and enforceable upon the final order of any court of competent jurisdiction in the United States. The trust shall vest legal title to its assets in its trustees for the benefit of the assuming insurer's United States policyholders and ceding insurees and their assigns and successors in interest. The trust and the assuming insurer shall be subject to examination as determined by the Director.

(c) The trust shall remain in effect for as long as the assuming insurer has outstanding obligations due under the reinsurance agreements subject to the trust. No later than February 28 of each year the trustee of the trust shall report to the Director in writing the balance of the trust and a list of the trust's investments at the preceding year-end and shall certify the date of termination of the trust, if so planned, or certify that the trust will not expire prior to the next following December 31.

No later than February 28 of each year, the assuming insurer's chief executive officer or chief financial officer shall certify to the Director that the trust fund contains funds in an amount not less than the assuming insurer's liabilities (as reported to the assuming insurer by its cedent) attributable to reinsurance ceded by U.S. ceding insurers, and in addition, a trusteed surplus of no less than $20,000,000. In the event that item (a-5) of subparagraph (3) of this paragraph (C) applies to the trust, the assuming insurer's chief executive officer or chief financial officer shall then certify to the Director that the trust fund contains funds in an amount not less than the assuming insurer's liabilities (as reported to the assuming insurer by its cedent) attributable to reinsurance ceded by U.S. ceding insurers and, in addition, a reduced trusteed surplus of not less than the amount that has been authorized by the regulatory authority having principal regulatory oversight of the trust.

(d) No later than February 28 of each year, an assuming insurer that maintains a trust fund in accordance with this paragraph (C) shall provide or make available, if requested by a beneficiary under the trust fund, the following information to the assuming insurer's U.S. ceding insurers or their assigns and successors in interest:

(i) a copy of the form of the trust agreement and any trust amendments to the trust agreement pertaining to the trust fund;

(ii) a copy of the annual and quarterly financial information, and its most recent audited financial statement provided to the Director by the assuming insurer, including any exhibits and schedules thereto;

(iii) any financial information provided to the Director by the assuming insurer that the Director has deemed necessary to determine the financial condition of the assuming insurer and the sufficiency of the trust fund;

(iv) a copy of any annual and quarterly financial information provided to the Director by the trustee of the trust fund maintained by the assuming insurer, including any exhibits and schedules thereto;

(v) a copy of the information required to be reported by the trustee of the trust to the Director under the provisions of this paragraph (C); and

(vi) a written certification that the trust fund consists of funds in trust in an amount not less than the assuming insurer's liabilities attributable to reinsurance liabilities (as reported to the assuming insurer by its cedent) attributable to reinsurance ceded by U.S. ceding insurers and, in addition, a trusteed surplus of not less than $20,000,000.

(3) The following requirements apply to the following categories of assuming insurer:

(a) The trust fund for a single assuming insurer shall consist of funds in trust in an amount not less than the assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding insurers, and in addition, the assuming insurer shall maintain a trusteed surplus of not less than $20,000,000, except as provided in item (a-5) of this subparagraph (3).

(a-5) At any time after the assuming insurer has permanently discontinued underwriting new business secured by the trust for at least 3 full years, the Director with principal regulatory oversight of the trust may authorize a reduction in the required trusteed surplus, but only after a finding, based on an assessment of the risk, that the new required surplus level is adequate for the protection of U.S. ceding insurers, policyholders, and claimants in light of reasonably foreseeable adverse loss development. The risk assessment may involve an actuarial review, including an independent analysis of reserves and cash flows, and shall consider all material risk factors, including, when applicable, the lines of business involved, the stability of the incurred loss estimates, and the effect of the surplus requirements on the assuming insurer's liquidity or solvency. The minimum required trusteed surplus may not be reduced to an amount less than 30% of the assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding insurers covered by the trust.

(b)(i) In the case of a group including incorporated and individual unincorporated underwriters:

(I) for reinsurance ceded under reinsurance agreements with an inception, amendment, or renewal date on or after January 1, 1993, the trust shall consist of a trusteed account in an amount not less than the respective underwriters' several liabilities attributable to business ceded by U.S. domiciled ceding insurers to any member of the group;

(II) for reinsurance ceded under reinsurance agreements with an inception date on or before December 31, 1992 and not amended or renewed after that date, notwithstanding the other provisions of this Act, the trust shall consist of a trusteed account in an amount not less than the group's several insurance and reinsurance liabilities attributable to business written in the United States; and

(III) in addition to these trusts, the group shall maintain in trust a trusteed surplus of which not less than $100,000,000 shall be held jointly for the benefit of the U.S. domiciled ceding insurers of any member of the group for all years of account.

(ii) The incorporated members of the group shall not be engaged in any business other than underwriting as a member of the group and shall be subject to the same level of solvency regulation and control by the group's domiciliary regulator as are the unincorporated members.

(iii) Within 90 days after its financial statements are due to be filed with the group's domiciliary regulator, the group shall provide to the Director an annual certification by the group's domiciliary regulator of the solvency of each underwriter member, or if a certification is unavailable, financial statements prepared by independent public accountants of each underwriter member of the group.

(c) In the case of a group of incorporated insurers under common administration, the group shall:

(i) have continuously transacted an insurance business outside the United States for at least 3 years immediately before making application for accreditation;

(ii) maintain aggregate policyholders' surplus of not less than $10,000,000,000;

(iii) maintain a trust in an amount not less than the group's several liabilities attributable to business ceded by United States domiciled ceding insurers to any member of the group pursuant to reinsurance contracts issued in the name of the group;

(iv) in addition, maintain a joint trusteed surplus of which not less than $100,000,000 shall be held jointly for the benefit of the United States ceding insurers of any member of the group as additional security for these liabilities; and

(v) within 90 days after its financial statements are due to be filed with the group's domiciliary regulator, make available to the Director an annual certification of each underwriter member's solvency by the member's domiciliary regulator and financial statements of each underwriter member of the group prepared by its independent public accountant.

(C-5) Credit shall be allowed when the reinsurance is ceded to an assuming insurer that has been certified by the Director as a reinsurer in this State and secures its obligations in accordance with the requirements of this paragraph (C-5).

(1) In order to be eligible for certification, the assuming insurer shall meet the following requirements:

(a) the assuming insurer must be domiciled and licensed to transact insurance or reinsurance in a qualified jurisdiction, as determined by the Director pursuant to subparagraph (3) of this paragraph (C-5);

(b) the assuming insurer must maintain minimum capital and surplus, or its equivalent, in an amount not less than $250,000,000 or such greater amount as determined by the Director pursuant to regulation; this requirement may also be satisfied by an association, including incorporated and individual unincorporated underwriters, having minimum capital and surplus equivalents (net of liabilities) of at least $250,000,000 and a central fund containing a balance of at least $250,000,000;

(c) the assuming insurer must maintain financial strength ratings from 2 or more rating agencies deemed acceptable by the Director; these ratings shall be based on interactive communication between the rating agency and the assuming insurer and shall not be based solely on publicly available information; each certified reinsurer shall be rated on a legal entity basis, with due consideration being given to the group rating where appropriate, except that an association, including incorporated and individual unincorporated underwriters, that has been approved to do business as a single certified reinsurer may be evaluated on the basis of its group rating; these financial strength ratings shall be one factor used by the Director in determining the rating that is assigned to the assuming insurer; acceptable rating agencies include the following:

(i) Standard & Poor's;

(ii) Moody's Investors Service;

(iii) Fitch Ratings;

(iv) A.M. Best Company; or

(v) any other nationally recognized statistical rating organization;

(d) the assuming insurer must agree to submit to the jurisdiction of this State, appoint the Director as its agent for service of process in this State, and agree to provide security for 100% of the assuming insurer's liabilities attributable to reinsurance ceded by U.S. ceding insurers if it resists enforcement of a final U.S. judgment; and

(e) the assuming insurer must agree to meet applicable information filing requirements as determined by the Director, both with respect to an initial application for certification and on an ongoing basis.

(2) An association, including incorporated and individual unincorporated underwriters, may be a certified reinsurer. In order to be eligible for certification, in addition to satisfying the requirements of subparagraph (1) of this paragraph (C-5):

(a) the association shall satisfy its minimum capital and surplus requirements through the capital and surplus equivalents (net of liabilities) of the association and its members, which shall include a joint central fund that may be applied to any unsatisfied obligation of the association or any of its members, in the amounts specified in item (b) of subparagraph (1) of this paragraph (C-5);

(b) the incorporated members of the association shall not be engaged in any business other than underwriting as a member of the association and shall be subject to the same level of regulation and solvency control by the association's domiciliary regulator as are the unincorporated members; and

(c) within 90 days after its financial statements are due to be filed with the association's domiciliary regulator, the association shall provide to the Director an annual certification by the association's domiciliary regulator of the solvency of each underwriter member; or if a certification is unavailable, financial statements, prepared by independent public accountants, of each underwriter member of the association.

(3) The Director shall create and publish a list of qualified jurisdictions, under which an assuming insurer licensed and domiciled in such jurisdiction is eligible to be considered for certification by the Director as a certified reinsurer.

(a) In order to determine whether the domiciliary jurisdiction of a non-U.S. assuming insurer is eligible to be recognized as a qualified jurisdiction, the Director shall evaluate the appropriateness and effectiveness of the reinsurance supervisory system of the jurisdiction, both initially and on an ongoing basis, and consider the rights, benefits, and extent of reciprocal recognition afforded by the non-U.S. jurisdiction to reinsurers licensed and domiciled in the U.S. A qualified jurisdiction must agree in writing to share information and cooperate with the Director with respect to all certified reinsurers domiciled within that jurisdiction. A jurisdiction may not be recognized as a qualified jurisdiction if the Director has determined that the jurisdiction does not adequately and promptly enforce final U.S. judgments and arbitration awards. The costs and expenses associated with the Director's review and evaluation of the domiciliary jurisdictions of non-U.S. assuming insurers shall be borne by the certified reinsurer or reinsurers domiciled in such jurisdiction.

(b) Additional factors to be considered in determining whether to recognize a qualified jurisdiction include, but are not limited to, the following:

(i) the framework under which the assuming insurer is regulated;

(ii) the structure and authority of the domiciliary regulator with regard to solvency regulation requirements and financial surveillance;

(iii) the substance of financial and operating standards for assuming insurers in the domiciliary jurisdiction;

(iv) the form and substance of financial reports required to be filed or made publicly available by reinsurers in the domiciliary jurisdiction and the accounting principles used;

(v) the domiciliary regulator's willingness to cooperate with U.S. regulators in general and the Director in particular;

(vi) the history of performance by assuming insurers in the domiciliary jurisdiction;

(vii) any documented evidence of substantial problems with the enforcement of final U.S. judgments in the domiciliary jurisdiction; and

(viii) any relevant international standards or guidance with respect to mutual recognition of reinsurance supervision adopted by the International Association of Insurance Supervisors or its successor organization.

(c) If, upon conducting an evaluation under this paragraph with respect to the reinsurance supervisory system of any non-U.S. assuming insurer, the Director determines that the jurisdiction qualifies to be recognized as a qualified jurisdiction, the Director shall publish notice and evidence of such recognition in an appropriate manner. The Director may establish a procedure to withdraw recognition of those jurisdictions that are no longer qualified.

(d) The Director shall consider the list of qualified jurisdictions through the NAIC committee process in determining qualified jurisdictions. If the Director approves a jurisdiction as qualified that does not appear on the list of qualified jurisdictions, then the Director shall provide thoroughly documented justification in accordance with criteria to be developed under regulations.

(e) U.S. jurisdictions that meet the requirement for accreditation under the NAIC financial standards and accreditation program shall be recognized as qualified jurisdictions.

(f) If a certified reinsurer's domiciliary jurisdiction ceases to be a qualified jurisdiction, then the Director may suspend the reinsurer's certification indefinitely, in lieu of revocation.

(4) If an applicant for certification has been certified as a reinsurer in an NAIC accredited jurisdiction, then the Director may defer to that jurisdiction's certification and to the rating assigned by that jurisdiction if the assuming insurer submits a properly executed Form CR-1 and such additional information as the Director requires. Such assuming insurer shall be considered to be a certified reinsurer in this State but only upon the Director's assignment of an Illinois rating, which shall be made based on the requirements of subparagraph (5) of this paragraph (C-5). The following shall apply:

(a) Any change in the certified reinsurer's status or rating in the other jurisdiction shall apply automatically in Illinois as of the date it takes effect in the other jurisdiction. The certified reinsurer shall notify the Director of any change in its status or rating within 10 days after receiving notice of the change.

(b) The Director may withdraw recognition of the other jurisdiction's rating at any time and assign a new rating in accordance with subparagraph (5) of this paragraph (C-5).

(c) The Director may withdraw recognition of the other jurisdiction's certification at any time with written notice to the certified reinsurer. Unless the Director suspends or revokes the certified reinsurer's certification in accordance with item (c) of subparagraph (9) of this paragraph (C-5), the certified reinsurer's certification shall remain in good standing in Illinois for a period of 3 months, which shall be extended if additional time is necessary to consider the assuming insurer's application for certification in Illinois.

(5) The Director shall assign a rating to each certified reinsurer pursuant to rules adopted by the Department. Factors that shall be considered as part of the evaluation process include the following:

(a) The certified reinsurer's financial strength rating from an acceptable rating agency. Financial strength ratings shall be classified according to the following ratings categories:

(i) Ratings Category "Secure - 1" corresponds to the highest level of rating given by a rating agency, including, but not limited to, A.M. Best Company rating A++; Standard & Poor's rating AAA; Moody's Investors Service rating Aaa; and Fitch Ratings rating AAA.

(ii) Ratings Category "Secure - 2" corresponds to the second-highest level of rating or group of ratings given by a rating agency, including, but not limited to, A.M. Best Company rating A+; Standard & Poor's rating AA+, AA, or AA-; Moody's Investors Service ratings Aa1, Aa2, or Aa3; and Fitch Ratings ratings AA+, AA, or AA-.

(iii) Ratings Category "Secure - 3" corresponds to the third-highest level of rating or group of ratings given by a rating agency, including, but not limited to, A.M. Best Company rating A; Standard & Poor's ratings A+ or A; Moody's Investors Service ratings A1 or A2; and Fitch Ratings ratings A+ or A.

(iv) Ratings Category "Secure - 4" corresponds to the fourth-highest level of rating or group of ratings given by a rating agency, including, but not limited to, A.M. Best Company rating A-; Standard & Poor's rating A-; Moody's Investors Service rating A3; and Fitch Ratings rating A-.

(v) Ratings Category "Secure - 5" corresponds to the fifth-highest level of rating or group of ratings given by a rating agency, including, but not limited to, A.M. Best Company ratings B++ or B+; Standard & Poor's ratings BBB+, BBB, or BBB-; Moody's Investors Service ratings Baa1, Baa2, or Baa3; and Fitch Ratings ratings BBB+, BBB, or BBB-.

(vi) Ratings Category "Vulnerable - 6" corresponds to a level of rating given by a rating agency, other than those described in subitems (i) through (v) of this item (a), including, but not limited to, A.M. Best Company rating B, B-, C++, C+, C, C-, D, E, or F; Standard & Poor's ratings BB+, BB, BB-, B+, B, B-, CCC, CC, C, D, or R; Moody's Investors Service ratings Ba1, Ba2, Ba3, B1, B2, B3, Caa, Ca, or C; and Fitch Ratings ratings BB+, BB, BB-, B+, B, B-, CCC+, CCC, CCC-, or D.

A failure to obtain or maintain at least 2 financial strength ratings from acceptable rating agencies shall result in loss of eligibility for certification.

(b) The business practices of the certified reinsurer in dealing with its ceding insurers, including its record of compliance with reinsurance contractual terms and obligations.

(c) For certified reinsurers domiciled in the U.S., a review of the most recent applicable NAIC Annual Statement Blank, either Schedule F (for property and casualty reinsurers) or Schedule S (for life and health reinsurers).

(d) For certified reinsurers not domiciled in the U.S., a review annually of Form CR-F (for property and casualty reinsurers) or Form CR-S (for life and health reinsurers).

(e) The reputation of the certified reinsurer for prompt payment of claims under reinsurance agreements, based on an analysis of ceding insurers' Schedule F reporting of overdue reinsurance recoverables, including the proportion of obligations that are more than 90 days past due or are in dispute, with specific attention given to obligations payable to companies that are in administrative supervision or receivership.

(f) Regulatory actions against the certified reinsurer.

(g) The report of the independent auditor on the financial statements of the insurance enterprise, on the basis described in item (h) of this subparagraph (5).

(h) For certified reinsurers not domiciled in the U.S., audited financial statements (audited Generally Accepted Accounting Principles (U.S. GAAP) basis statement if available, audited International Financial Reporting Standards (IFRS) basis statements are allowed but must include an audited footnote reconciling equity and net income to U.S. GAAP basis or, with the permission of the Director, audited IFRS basis statements with reconciliation to U.S. GAAP basis certified by an officer of the company), regulatory filings, and actuarial opinion (as filed with the non-U.S. jurisdiction supervisor). Upon the initial application for certification, the Director shall consider the audited financial statements filed with its non-U.S. jurisdiction supervisor for the 3 years immediately preceding the date of the initial application for certification.

(i) The liquidation priority of obligations to a ceding insurer in the certified reinsurer's domiciliary jurisdiction in the context of an insolvency proceeding.

(j) A certified reinsurer's participation in any solvent scheme of arrangement, or similar procedure, that involves U.S. ceding insurers. The Director shall receive prior notice from a certified reinsurer that proposes participation by the certified reinsurer in a solvent scheme of arrangement.

The maximum rating that a certified reinsurer may be assigned shall correspond to its financial strength rating, which shall be determined according to subitems (i) through (vi) of item (a) of this subparagraph (5). The Director shall use the lowest financial strength rating received from an acceptable rating agency in establishing the maximum rating of a certified reinsurer.

(6) Based on the analysis conducted under item (e) of subparagraph (5) of this paragraph (C-5) of a certified reinsurer's reputation for prompt payment of claims, the Director may make appropriate adjustments in the security the certified reinsurer is required to post to protect its liabilities to U.S. ceding insurers, provided that the Director shall, at a minimum, increase the security the certified reinsurer is required to post by one rating level under item (a) of subparagraph (8) of this paragraph (C-5) if the Director finds that:

(a) more than 15% of the certified reinsurer's ceding insurance clients have overdue reinsurance recoverables on paid losses of 90 days or more that are not in dispute and that exceed $100,000 for each cedent; or

(b) the aggregate amount of reinsurance recoverables on paid losses that are not in dispute that are overdue by 90 days or more exceeds $50,000,000.

(7) The Director shall post notice on the Department's website promptly upon receipt of any application for certification, including instructions on how members of the public may respond to the application. The Director may not take final action on the application until at least 30 days after posting the notice required by this subparagraph. The Director shall publish a list of all certified reinsurers and their ratings.

(8) A certified reinsurer shall secure obligations assumed from U.S. ceding insurers under this subsection (1) at a level consistent with its rating.

(a) The amount of security required in order for full credit to be allowed shall correspond with the applicable ratings category:

Secure - 1: 0%.

Secure - 2: 10%.

Secure - 3: 20%.

Secure - 4: 50%.

Secure - 5: 75%.

Vulnerable - 6: 100%.

(b) Nothing in this subparagraph (8) shall prohibit the parties to a reinsurance agreement from agreeing to provisions establishing security requirements that exceed the minimum security requirements established for certified reinsurers under this Section.

(c) In order for a domestic ceding insurer to qualify for full financial statement credit for reinsurance ceded to a certified reinsurer, the certified reinsurer shall maintain security in a form acceptable to the Director and consistent with the provisions of subsection (2) of this Section, or in a multibeneficiary trust in accordance with paragraph (C) of this subsection (1), except as otherwise provided in this subparagraph (8).

(d) If a certified reinsurer maintains a trust to fully secure its obligations subject to paragraph (C) of this subsection (1), and chooses to secure its obligations incurred as a certified reinsurer in the form of a multibeneficiary trust, then the certified reinsurer shall maintain separate trust accounts for its obligations incurred under reinsurance agreements issued or renewed as a certified reinsurer with reduced security as permitted by this subsection or comparable laws of other U.S. jurisdictions and for its obligations subject to paragraph (C) of this subsection (1). It shall be a condition to the grant of certification under this paragraph (C-5) that the certified reinsurer shall have bound itself, by the language of the trust and agreement with the Director with principal regulatory oversight of each such trust account, to fund, upon termination of any such trust account, out of the remaining surplus of such trust any deficiency of any other such trust account. The certified reinsurer shall also provide or make available, if requested by a beneficiary under a trust, all the information that is required to be provided under the requirements of item (d) of subparagraph (2) of paragraph (C) of this subsection (1) to the certified reinsurer's U.S. ceding insurers or their assigns and successors in interest. The assuming insurer may decline to release trade secrets or commercially sensitive information that would qualify as exempt from disclosure under the Freedom of Information Act.

(e) The minimum trusteed surplus requirements provided in paragraph (C) of this subsection (1) are not applicable with respect to a multibeneficiary trust maintained by a certified reinsurer for the purpose of securing obligations incurred under this subsection, except that such trust shall maintain a minimum trusteed surplus of $10,000,000.

(f) With respect to obligations incurred by a certified reinsurer under this subsection (1), if the security is insufficient, then the Director may reduce the allowable credit by an amount proportionate to the deficiency and may impose further reductions in allowable credit upon finding that there is a material risk that the certified reinsurer's obligations will not be paid in full when due.

(9)(a) In the case of a downgrade by a rating agency or other disqualifying circumstance, the Director shall by written notice assign a new rating to the certified reinsurer in accordance with the requirements of subparagraph (5) of this paragraph (C-5).

(b) If the rating of a certified reinsurer is upgraded by the Director, then the certified reinsurer may meet the security requirements applicable to its new rating on a prospective basis, but the Director shall require the certified reinsurer to post security under the previously applicable security requirements as to all contracts in force on or before the effective date of the upgraded rating. If the rating of a certified reinsurer is downgraded by the Director, then the Director shall require the certified reinsurer to meet the security requirements applicable to its new rating for all business it has assumed as a certified reinsurer.

(c) The Director may suspend, revoke, or otherwise modify a certified reinsurer's certification at any time if the certified reinsurer fails to meet its obligations or security requirements under this Section or if other financial or operating results of the certified reinsurer, or documented significant delays in payment by the certified reinsurer, lead the Director to reconsider the certified reinsurer's ability or willingness to meet its contractual obligations. In seeking to suspend, revoke, or otherwise modify a certified reinsurer's certification, the Director shall follow the procedures provided in paragraph (G) of this subsection (1).

(d) For purposes of this subsection (1), a certified reinsurer whose certification has been terminated for any reason shall be treated as a certified reinsurer required to secure 100% of its obligations.

(i) As used in this item (d), the term "terminated" refers to revocation, suspension, voluntary surrender and inactive status.

(ii) If the Director continues to assign a higher rating as permitted by other provisions of this Section, then this requirement does not apply to a certified reinsurer in inactive status or to a reinsurer whose certification has been suspended.

(e) Upon revocation of the certification of a certified reinsurer by the Director, the assuming insurer shall be required to post security in accordance with subsection (2) of this Section in order for the ceding insurer to continue to take credit for reinsurance ceded to the assuming insurer. If funds continue to be held in trust, then the Director may allow additional credit equal to the ceding insurer's pro rata share of the funds, discounted to reflect the risk of uncollectibility and anticipated expenses of trust administration.

(f) Notwithstanding the change of a certified reinsurer's rating or revocation of its certification, a domestic insurer that has ceded reinsurance to that certified reinsurer may not be denied credit for reinsurance for a period of 3 months for all reinsurance ceded to that certified reinsurer, unless the reinsurance is found by the Director to be at high risk of uncollectibility.

(10) A certified reinsurer that ceases to assume new business in this State may request to maintain its certification in inactive status in order to continue to qualify for a reduction in security for its in-force business. An inactive certified reinsurer shall continue to comply with all applicable requirements of this subsection (1), and the Director shall assign a rating that takes into account, if relevant, the reasons why the reinsurer is not assuming new business.

(11) Credit for reinsurance under this paragraph (C-5) shall apply only to reinsurance contracts entered into or renewed on or after the effective date of the certification of the assuming insurer.

(12) The Director shall comply with all reporting and notification requirements that may be established by the NAIC with respect to certified reinsurers and qualified jurisdictions.

(C-10)(1) Credit shall be allowed when the reinsurance is ceded to an assuming insurer meeting each of the conditions set forth in this subparagraph.

(a) The assuming insurer must have its head office in or be domiciled in, as applicable, and be licensed in a reciprocal jurisdiction. As used in this paragraph (C-10), "reciprocal jurisdiction" means a jurisdiction that meets one of the following:

(i) a non-U.S. jurisdiction that is subject to an in-force covered agreement with the United States, each within its legal authority, or, in the case of a covered agreement between the United States and European Union, is a member state of the European Union; as used in this subitem, "covered agreement" means an agreement entered into pursuant to the Dodd-Frank Wall Street Reform and Consumer Protection Act (31 U.S.C. 313 and 314) that is currently in effect or in a period of provisional application and addresses the elimination, under specified conditions, of collateral requirements as a condition for entering into any reinsurance agreement with a ceding insurer domiciled in this State or for allowing the ceding insurer to recognize credit for reinsurance;

(ii) a U.S. jurisdiction that meets the requirements for accreditation under the NAIC financial standards and accreditation program; or

(iii) a qualified jurisdiction, as determined by the Director pursuant to subparagraph (3) of paragraph (C-5) of subsection (1) of this Section, that is not otherwise described in subitem (i) or (ii) of this item and that meets certain additional requirements, consistent with the terms and conditions of in-force covered agreements, as specified by the Department by rule.

(b) The assuming insurer must have and maintain, on an ongoing basis, minimum capital and surplus, or its equivalent, calculated according to the methodology of its domiciliary jurisdiction, in an amount to be set forth by rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, minimum capital and surplus equivalents (net of liabilities) calculated according to the methodology applicable in its domiciliary jurisdiction and a central fund containing a balance in amounts to be set forth by rule.

(c) The assuming insurer must have and maintain, on an ongoing basis, a minimum solvency or capital ratio, as applicable, that will be set forth by rule. If the assuming insurer is an association, including incorporated and individual unincorporated underwriters, it must have and maintain, on an ongoing basis, a minimum solvency or capital ratio in the reciprocal jurisdiction where the assuming insurer has its head office or is domiciled, as applicable, and is also licensed.

(d) The assuming insurer must provide adequate assurance to the Director, in a form specified by the Department by rule, as follows:

(i) the assuming insurer must provide prompt written notice and explanation to the Director if it falls below the minimum requirements set forth in items (b) or (c) of this subparagraph or if any regulatory action is taken against it for serious noncompliance with applicable law;

(ii) the assuming insurer must consent in writing to the jurisdiction of the courts of this State and to the appointment of the Director as agent for service of process; the Director may require that consent for service of process be provided to the Director and included in each reinsurance agreement; nothing in this subitem (ii) shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree to alternative dispute resolution mechanisms, except to the extent such agreements are unenforceable under applicable insolvency or delinquency laws;

(iii) the assuming insurer must consent in writing to pay all final judgments obtained by a ceding insurer or its legal successor, whenever enforcement is sought, that have been declared enforceable in the jurisdiction where the judgment was obtained;

(iv) each reinsurance agreement must include a provision requiring the assuming insurer to provide security in an amount equal to 100% of the assuming insurer's liabilities attributable to reinsurance ceded pursuant to that agreement if the assuming insurer resists enforcement of a final judgment that is enforceable under the law of the jurisdiction in which it was obtained or a properly enforceable arbitration award, whether obtained by the ceding insurer or by its legal successor on behalf of its resolution estate; and

(v) the assuming insurer must confirm that it is not presently participating in any solvent scheme of arrangement which involves this State's ceding insurers and agree to notify the ceding insurer and the Director and to provide security in an amount equal to 100% of the assuming insurer's liabilities to the ceding insurer if the assuming insurer enters into such a solvent scheme of arrangement; the security shall be in a form consistent with the provisions of paragraph (C-5) of subsection (1) and subsection (2) and as specified by the Department by rule.

(e) If requested by the Director, the assuming insurer or its legal successor must provide, on behalf of itself and any legal predecessors, certain documentation to the Director, as specified by the Department by rule.

(f) The assuming insurer must maintain a practice of prompt payment of claims under reinsurance agreements pursuant to criteria set forth by rule.

(g) The assuming insurer's supervisory authority must confirm to the Director on an annual basis, as of the preceding December 31 or at the annual date otherwise statutorily reported to the reciprocal jurisdiction, that the assuming insurer complied with the requirements set forth in items (b) and (c) of this subparagraph.

(h) Nothing in this subparagraph precludes an assuming insurer from providing the Director with information on a voluntary basis.

(2) The Director shall timely create and publish a list of reciprocal jurisdictions.

(a) The Director's list shall include any reciprocal jurisdiction as defined under subitems (i) and (ii) of item (a) of subparagraph (1) of this paragraph, and shall consider any other reciprocal jurisdiction included on the list of reciprocal jurisdictions published through the NAIC committee process. The Director may approve a jurisdiction that does not appear on the NAIC list of reciprocal jurisdictions in accordance with criteria to be developed by rules adopted by the Department.

(b) The Director may remove a jurisdiction from the list of reciprocal jurisdictions upon a determination that the jurisdiction no longer meets the requirements of a reciprocal jurisdiction in accordance with a process set forth in rules adopted by the Department, except that the Director shall not remove from the list a reciprocal jurisdiction as defined under subitems (i) and (ii) of item (a) of subparagraph (1) of this paragraph. If otherwise allowed pursuant to this Section, credit for reinsurance ceded to an assuming insurer that has its home office or is domiciled in that jurisdiction shall be allowed upon removal of a reciprocal jurisdiction from this list.

(3) The Director shall timely create and publish a list of assuming insurers that have satisfied the conditions set forth in this paragraph and to which cessions shall be granted credit in accordance with this paragraph. The Director may add an assuming insurer to the list if a NAIC-accredited jurisdiction has added the assuming insurer to a list of assuming insurers or if, upon initial eligibility, the assuming insurer submits the information to the Director as required under item (d) of subparagraph (1) of this paragraph and complies with any additional requirements that the Department may impose by rule except to the extent that they conflict with an applicable covered agreement.

(4) If the Director determines that an assuming insurer no longer meets one or more of the requirements under this paragraph, the Director may revoke or suspend the eligibility of the assuming insurer for recognition under this paragraph in accordance with procedures set forth by rule.

(a) While an assuming insurer's eligibility is suspended, no reinsurance agreement issued, amended, or renewed after the effective date of the suspension qualifies for credit except to the extent that the assuming insurer's obligations under the contract are secured in accordance with subsection (2).

(b) If an assuming insurer's eligibility is revoked, no credit for reinsurance may be granted after the effective date of the revocation with respect to any reinsurance agreements entered into by the assuming insurer, including reinsurance agreements entered into before the date of revocation, except to the extent that the assuming insurer's obligations under the contract are secured in a form acceptable to the Director and consistent with the provisions of subsection (2).

(5) If subject to a legal process of rehabilitation, liquidation, or conservation, as applicable, the ceding insurer or its representative may seek and, if determined appropriate by the court in which the proceedings are pending, may obtain an order requiring that the assuming insurer post security for all outstanding ceded liabilities.

(6) Nothing in this paragraph shall limit or in any way alter the capacity of parties to a reinsurance agreement to agree on requirements for security or other terms in that reinsurance agreement except as expressly prohibited by this Section or other applicable law or regulation.

(7) Credit may be taken under this paragraph only for reinsurance agreements entered into, amended, or renewed on or after the effective date of this amendatory Act of the 102nd General Assembly and only with respect to losses incurred and reserves reported on or after the later of:

(i) the date on which the assuming insurer has met all eligibility requirements pursuant to subparagraph (1) of this paragraph; and

(ii) the effective date of the new reinsurance agreement, amendment, or renewal.

This subparagraph does not alter or impair a ceding insurer's right to take credit for reinsurance, to the extent that credit is not available under this paragraph, as long as the reinsurance qualifies for credit under any other applicable provision of this Section.

(8) Nothing in this paragraph shall authorize an assuming insurer to withdraw or reduce the security provided under any reinsurance agreement except as permitted by the terms of the agreement.

(9) Nothing in this paragraph shall limit or in any way alter the capacity of parties to any reinsurance agreement to renegotiate the agreement.

(D) Credit shall be allowed when the reinsurance is ceded to an assuming insurer not meeting the requirements of paragraph (A), (B), (B-5), (C), (C-5), or (C-10) of this subsection (1) but only with respect to the insurance of risks located in jurisdictions where that reinsurance is required by applicable law or regulation of that jurisdiction.

(E) If the assuming insurer is not licensed to transact insurance in this State or an accredited or certified reinsurer in this State, the credit permitted by paragraphs (B-5) and (C) of this subsection (1) shall not be allowed unless the assuming insurer agrees in the reinsurance agreements:

(1) that in the event of the failure of the assuming insurer to perform its obligations under the terms of the reinsurance agreement, the assuming insurer, at the request of the ceding insurer, shall submit to the jurisdiction of any court of competent jurisdiction in any state of the United States, will comply with all requirements necessary to give the court jurisdiction, and will abide by the final decision of the court or of any appellate court in the event of an appeal; and

(2) to designate the Director or a designated attorney as its true and lawful attorney upon whom may be served any lawful process in any action, suit, or proceeding instituted by or on behalf of the ceding company.

This provision is not intended to conflict with or override the obligation of the parties to a reinsurance agreement to arbitrate their disputes, if an obligation to arbitrate is created in the agreement.

(F) If the assuming insurer does not meet the requirements of paragraph (A), (B), (B-5), or (C-10) of this subsection (1), the credit permitted by paragraph (C) or (C-5) of this subsection (1) shall not be allowed unless the assuming insurer agrees in the trust agreements to the following conditions:

(1) Notwithstanding any other provisions in the trust instrument, if the trust fund is inadequate because it contains an amount less than the amount required by subparagraph (3) of paragraph (C) of this subsection (1) or if the grantor of the trust has been declared insolvent or placed into receivership, rehabilitation, liquidation, or similar proceedings under the laws of its state or country of domicile, the trustee shall comply with an order of the state official with regulatory oversight over the trust or with an order of a court of competent jurisdiction directing the trustee to transfer to the state official with regulatory oversight all of the assets of the trust fund.

(2) The assets shall be distributed by and claims shall be filed with and valued by the state official with regulatory oversight in accordance with the laws of the state in which the trust is domiciled that are applicable to the liquidation of domestic insurance companies.

(3) If the state official with regulatory oversight determines that the assets of the trust fund or any part thereof are not necessary to satisfy the claims of the U.S. ceding insurers of the grantor of the trust, the assets or part thereof shall be returned by the state official with regulatory oversight to the trustee for distribution in accordance with the trust agreement.

(4) The grantor shall waive any rights otherwise available to it under U.S. law that are inconsistent with the provision.

(G) If an accredited or certified reinsurer ceases to meet the requirements for accreditation or certification, then the Director may suspend or revoke the reinsurer's accreditation or certification.

(1) The Director must give the reinsurer notice and opportunity for hearing. The suspension or revocation may not take effect until after the Director's order on hearing, unless:

(a) the reinsurer waives its right to hearing;

(b) the Director's order is based on regulatory action by the reinsurer's domiciliary jurisdiction or the voluntary surrender or termination of the reinsurer's eligibility to transact insurance or reinsurance business in its domiciliary jurisdiction or in the primary certifying state of the reinsurer under subparagraph (4) of paragraph (C-5) of this subsection (1); or

(c) the Director finds that an emergency requires immediate action and a court of competent jurisdiction has not stayed the Director's action.

(2) While a reinsurer's accreditation or certification is suspended, no reinsurance contract issued or renewed after the effective date of the suspension qualifies for credit except to the extent that the reinsurer's obligations under the contract are secured in accordance with subsection (2) of this Section. If a reinsurer's accreditation or certification is revoked, no credit for reinsurance may be granted after the effective date of the revocation, except to the extent that the reinsurer's obligations under the contract are secured in accordance with subsection (2) of this Section.

(H) The following provisions shall apply concerning concentration of risk:

(1) A ceding insurer shall take steps to manage its reinsurance recoverable proportionate to its own book of business. A domestic ceding insurer shall notify the Director within 30 days after reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, exceeds 50% of the domestic ceding insurer's last reported surplus to policyholders, or after it is determined that reinsurance recoverables from any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

(2) A ceding insurer shall take steps to diversify its reinsurance program. A domestic ceding insurer shall notify the Director within 30 days after ceding to any single assuming insurer, or group of affiliated assuming insurers, more than 20% of the ceding insurer's gross written premium in the prior calendar year, or after it has determined that the reinsurance ceded to any single assuming insurer, or group of affiliated assuming insurers, is likely to exceed this limit. The notification shall demonstrate that the exposure is safely managed by the domestic ceding insurer.

(2) Credit for the reinsurance ceded by a domestic insurer to an assuming insurer not meeting the requirements of subsection (1) of this Section shall be allowed in an amount not exceeding the assets or liabilities carried by the ceding insurer. The credit shall not exceed the amount of funds held by or held in trust for the ceding insurer under a reinsurance contract with the assuming insurer as security for the payment of obligations thereunder, if the security is held in the United States subject to withdrawal solely by, and under the exclusive control of, the ceding insurer; or, in the case of a trust, held in a qualified United States financial institution, as defined in paragraph (B) of subsection (3) of this Section. This security may be in the form of:

(A) Cash.

(B) Securities listed by the Securities Valuation Office of the National Association of Insurance Commissioners, including those deemed exempt from filing as defined by the Purposes and Procedures Manual of the Securities Valuation Office that conform to the requirements of Article VIII of this Code that are not issued by an affiliate of either the assuming or ceding company.

(C) Clean, irrevocable, unconditional, letters of credit issued or confirmed by a qualified United States financial institution, as defined in paragraph (A) of subsection (3) of this Section. The letters of credit shall be effective no later than December 31 of the year for which filing is being made, and in the possession of, or in trust for, the ceding company on or before the filing date of its annual statement. Letters of credit meeting applicable standards of issuer acceptability as of the dates of their issuance (or confirmation) shall, notwithstanding the issuing (or confirming) institution's subsequent failure to meet applicable standards of issuer acceptability, continue to be acceptable as security until their expiration, extension, renewal, modification, or amendment, whichever first occurs.

(D) Any other form of security acceptable to the Director.

(3)(A) For purposes of paragraph (C) of subsection (2) of this Section, a "qualified United States financial institution" means an institution that:

(1) is organized or, in the case of a U.S. office of a foreign banking organization, licensed under the laws of the United States or any state thereof;

(2) is regulated, supervised, and examined by U.S. federal or state authorities having regulatory authority over banks and trust companies;

(3) has been designated by either the Director or the Securities Valuation Office of the National Association of Insurance Commissioners as meeting such standards of financial condition and standing as are considered necessary and appropriate to regulate the quality of financial institutions whose letters of credit will be acceptable to the Director; and

(4) is not affiliated with the assuming company.

(B) A "qualified United States financial institution" means, for purposes of those provisions of this law specifying those institutions that are eligible to act as a fiduciary of a trust, an institution that:

(1) is organized or, in the case of the U.S. branch or agency office of a foreign banking organization, licensed under the laws of the United States or any state thereof and has been granted authority to operate with fiduciary powers;

(2) is regulated, supervised, and examined by federal or state authorities having regulatory authority over banks and trust companies; and

(3) is not affiliated with the assuming company, however, if the subject of the reinsurance contract is insurance written pursuant to Section 155.51 of this Code, the financial institution may be affiliated with the assuming company with the prior approval of the Director.

(C) Except as set forth in subparagraph (11) of paragraph (C-5) of subsection (1) of this Section as to cessions by certified reinsurers, this amendatory Act of the 100th General Assembly shall apply to all cessions after the effective date of this amendatory Act of the 100th General Assembly under reinsurance agreements that have an inception, anniversary, or renewal date not less than 6 months after the effective date of this amendatory Act of the 100th General Assembly.

(D) The Department shall adopt rules implementing the provisions of this Article.

(Source: P.A. 102-578, eff. 7-1-22 (See Section 5 of P.A. 102-672 for effective date of P.A. 102-578).)

(215 ILCS 5/173.2) (from Ch. 73, par. 785.2)

Sec. 173.2. Reserve credit for liability assumed.

No credit shall be allowed as an admitted asset or as a deduction from liability, to any ceding company for reinsurance unless the reinsurance is payable by the assuming company on the basis of the liability of the ceding company under the contract or contracts reinsured without diminution because of the insolvency of the ceding company.

(Source: Laws 1965, p. 1077.)

(215 ILCS 5/173.3) (from Ch. 73, par. 785.3)

Sec. 173.3. Payment by assuming company.

(1) No such credit shall be allowed for reinsurance unless the reinsurance agreement provides that payments by the assuming company shall be made directly to the ceding company or to its liquidator, receiver, or statutory successor, except where the contract specifically provides another payee of such reinsurance in the event of the insolvency of the ceding company or where the assuming company with the consent of the direct insured or insureds has assumed such policy obligations of the ceding company to the payees under such policies and in substitution for the obligations of the ceding company to such payees.

(2) Except as provided in this Section, no assuming company may pay or settle, or agree to pay or settle, any policy claim, or any portion thereof, directly to or with a policyholder of any ceding company if an Order of Rehabilitation or Liquidation has been entered against such ceding company.

(Source: P.A. 77-1329.)

(215 ILCS 5/173.4) (from Ch. 73, par. 785.4)

Sec. 173.4. Assuming company may defend claims for insolvent ceding company.

Such reinsurance agreement may provide that the liquidator or receiver of an insolvent ceding company shall give written notice of the pendency of a claim against the insolvent ceding company on the policy or bond reinsured within a reasonable time after such claim is filed in the insolvency proceeding and that during the pendency of such claim any assuming company may investigate such claim and interpose, at its own expense, in the proceeding where such claim is to be adjudicated any defense or defenses which it considers available to the ceding company or its liquidator or receiver. The expense thus incurred by the assuming company is chargeable against the insolvent ceding company as a part of the expense of liquidation to the extent of a proportionate share of the benefit which accrues to the ceding company solely as a result of the defense undertaken by the assuming company.

Where two or more assuming companies are involved in the same claim and a majority in interest elect to interpose a defense to such claim, the expense shall be apportioned in accordance with the terms of the reinsurance agreement as though such expense had been incurred by the ceding company.

(Source: Laws 1965, p. 1077.)

(215 ILCS 5/173.5) (from Ch. 73, par. 785.5)

Sec. 173.5. Crediting of commissions from cancellable reinsurance.

Where the parties to a reinsurance contract cancel such contract within 90 days of its effective date without providing for a runoff of the reinsurance in force at the date of cancellation, credit for commission shall be allowed on the financial statement of the ceding company only for that amount of such commission as is actually earned. In the case of any cancellation of reinsurance contracts involving more than 20% of the ceding company's premiums in force, the ceding company shall notify the Director thereof in writing, stating the estimated amount of gross unearned premiums and return commissions involved.

(Source: Laws 1965, p. 1077.)

(215 ILCS 5/174) (from Ch. 73, par. 786)

Sec. 174. Kinds of agreements requiring approval.

(1) The following kinds of reinsurance agreements shall not be entered into by any domestic company unless such agreements are approved in writing by the Director:

(a) Agreements of reinsurance of any such company transacting the kind or kinds of business enumerated in Class 1 of Section 4, or as a Fraternal Benefit Society under Article XVII, a Mutual Benefit Association under Article XVIII, a Burial Society under Article XIX or an Assessment Accident and Assessment Accident and Health Company under Article XXI, cedes previously issued and outstanding risks to any company, or cedes any risks to a company not authorized to transact business in this State, or assumes any outstanding risks on which the aggregate reserves and claim liabilities exceed 20 percent of the aggregate reserves and claim liabilities of the assuming company, as reported in the preceding annual statement, for the business of either life or accident and health insurance.

(b) Any agreement or agreements of reinsurance whereby any company transacting the kind or kinds of business enumerated in either Class 2 or Class 3 of Section 4 cedes to any company or companies at one time, or during a period of six consecutive months more than twenty per centum of the total amount of its previously retained unearned premium reserve liability.

(c) (Blank).

(2) An agreement which is not disapproved by the Director within thirty days after its submission shall be deemed approved.

(Source: P.A. 98-969, eff. 1-1-15.)

(215 ILCS 5/174.1) (from Ch. 73, par. 786.1)

Sec. 174.1. Kinds of Agreements Prohibited. No domestic stock company with less than $5,000,000 capital and surplus nor domestic mutual or reciprocal company with less than $5,000,000 surplus may assume as reinsurance any of the kind or kinds of businesses enumerated in Class 2 or Class 3 of Section 4 of this Code, except Class 2(a), and except for facultative reinsurance of specific risks and assumption of risks from companies subject to "An Act relating to local, mutual district, county and township insurance companies", approved March 13, 1936, as amended. If approval of the Director is obtained prior to the reinsurance assumption, this prohibition shall not apply to any company organized and authorized to do business in Illinois between July 1, 1981, and June 30, 1983, until January 1, 1989.

(Source: P.A. 84-671.)

(215 ILCS 5/175) (from Ch. 73, par. 787)

Sec. 175. Conditions for approval.

Any reinsurance agreement requiring the written approval of the Director under section 174 shall be approved by him if the terms thereof do not injuriously affect the rights of policyholders of any of the companies which are parties thereto. If the Director refuses to approve any such agreement, he shall grant the company a hearing upon request.

(Source: Laws 1965, p. 1077.)

(215 ILCS 5/176) (from Ch. 73, par. 788)

Sec. 176. Pending actions.

Whenever a company agrees to assume and carry out directly with the policyholder any of the policy obligations of the ceding company under a reinsurance agreement, any claim existing or action or proceeding pending arising out of such policy, by or against the ceding company with respect to such obligations may be prosecuted to judgment as if such reinsurance agreement had not been made, or the assuming company may be substituted in place of the ceding company.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/177) (from Ch. 73, par. 789)

Sec. 177. Transfer of deposits.

The provisions of section 170 applicable to the transfer of deposits of legal reserves on policies of merged or consolidated companies shall apply to the transfer of deposits of such reserves of a ceding company in the case of a reinsurance agreement, and for the purposes of determining the conditions and requirements for such transfer the assuming company shall be regarded as a surviving or new company and the ceding company shall be regarded as a company that has been merged or consolidated.

(Source: Laws 1937, p. 696.)

(215 ILCS 5/178)

Sec. 178. (Repealed).

(Source: Laws 1937, p. 696. Repealed by P.A. 98-692, eff. 7-1-14; 98-969, eff. 1-1-15.)

(215 ILCS 5/179) (from Ch. 73, par. 791)

Sec. 179. Payment of fees to officer or director prohibited.

(1) No director or officer of any company, party to a reinsurance agreement, except as fully expressed in the reinsurance agreement, shall receive any fee, commission, other compensation or valuable consideration whatever, directly or indirectly, for in any manner aiding, promoting or assisting in the negotiation of such reinsurance agreement.

(2) Any person violating the provisions of this section shall be guilty of a Class A misdemeanor.

(Source: P.A. 77-2699.)

(215 ILCS 5/179a)

Sec. 179a. Managing general agent prohibition.

(a) No managing general agent, as defined in Section 141a, shall receive any compensation or remuneration for, or in any manner profit from, obtaining or arranging reinsurance for a domestic company with respect to business underwritten by that managing general agent.

(b) Any person violating the provisions of this Section is guilty of a Class A misdemeanor.

(Source: P.A. 88-364.)

(215 ILCS 5/179b)

Sec. 179b. Reinsurance committee. Each domestic company that cedes any reinsurance must establish and maintain a reinsurance committee with not fewer than 3 members, at least one of which must be a member of the company's board of directors. The committee shall review and approve all treaty reinsurance placements and review and approve guidelines for facultative placements for the company, with the exception of a reinsurance agreement in which the aggregate premium ceded in any one year is less than 1% of the company's annual gross written premium. The committee shall give special attention to reinsurers' financial strength and performance record.

(Source: P.A. 88-364.)

(215 ILCS 5/Art. XI.5 heading) ARTICLE XI 1/2. PROTECTED CELL COMPANIES

(215 ILCS 5/179A-1)

Sec. 179A-1. Short title. This Article may be cited as the Protected Cell Company Law.

(Source: P.A. 91-278, eff. 7-23-99.)

(215 ILCS 5/179A-5)

Sec. 179A-5. Purpose. This Article is adopted to provide a basis for the creation of protected cells by a domestic insurer as one means of accessing alternative sources of capital and achieving the benefits of insurance securitization. Investors in fully funded insurance securitization transactions provide funds that are available to pay the insurer's insurance obligations or to repay the investors or both. The creation of protected cells is intended to be a means to achieve more efficiencies in conducting insurance securitizations.

Under the terms of the typical debt instrument underlying an insurance securitization transaction, prepaid principal is repaid to the investor on a specified maturity date with interest, unless a trigger event occurs. The insurance securitization proceeds secure both the protected cell company's insurance obligations if a trigger event occurs, as well as the protected cell company's obligation to repay the insurance securitization investors if a trigger event does not occur. Insurance securitization transactions have been performed through alien companies in order to utilize efficiencies available to alien companies that are not currently available to domestic companies. This Article is adopted in order to create more efficiency in conducting insurance securitization, to allow domestic companies easier access to alternative sources of capital, and to promote the benefits of insurance securitization generally.

(Source: P.A. 91-278, eff. 7-23-99; 92-74, eff. 7-12-01.)

(215 ILCS 5/179A-10)

Sec. 179A-10. Definitions.

"Domestic company" means an insurance company domiciled in the State of Illinois.

"Fully funded" means that, with respect to any exposure attributed to a protected cell, the market value of the protected cell assets, on the date on which the insurance securitization is effected, equals or exceeds the maximum possible exposure attributable to the protected cell with respect to those exposures.

"General account" means the assets and liabilities of a protected cell company other than protected cell assets and protected cell liabilities.

"Indemnity trigger" means a transaction term by which relief of the issuer's obligation to repay investors is triggered by its incurring a specified level of losses under its insurance or reinsurance contracts.

"Market value" has the meaning given that term in Article VIII of this Code (Investments of Domestic Companies).

"Non-indemnity trigger" means a transaction term by which relief of the issuer's obligation to repay investors is triggered solely by some event or condition other than the individual protected cell company incurring a specified level of losses under its insurance or reinsurance contracts.

"Protected cell" means an identified pool of assets and liabilities of a domestic company segregated and insulated by means of this Article from the remainder of the company's assets and liabilities.

"Protected cell account" means a specifically identified bank or custodial account established by a protected cell company for the purpose of segregating the protected cell assets of one protected cell from the protected cell assets of other protected cells and from the assets of the protected cell company's general account.

"Protected cell assets" means all assets, contract rights, and general intangibles identified with and attributable to a specific protected cell of a protected cell company.

"Protected cell company" means a domestic company that has one or more protected cells.

"Protected cell company insurance securitization" means the issuance of debt instruments, the proceeds from which support the exposures attributed to the protected cell, by a protected cell company where repayment of principal or interest, or both, to investors pursuant to the transaction terms is contingent upon the occurrence or nonoccurrence of an event with respect to which the protected cell company is exposed to loss under insurance or reinsurance contracts it has issued.

"Protected cell liabilities" means all liabilities and other obligations identified with and attributable to a specific protected cell of a protected cell company.

(Source: P.A. 91-278, eff. 7-23-99; 92-74, eff. 7-12-01.)

(215 ILCS 5/179A-15)

Sec. 179A-15. Establishment of protected cells.

(a) A domestic company may, with the prior written approval by the Director of a plan of operation submitted by the domestic company with respect to each protected cell, establish one or more protected cells in connection with an insurance securitization. Upon the written approval by the Director of the plan of operation, which shall include, but not be limited to, the specific business and investment guidelines of the protected cell, the protected cell company may, in accordance with the approved plan of operation, attribute to the protected cell insurance obligations with respect to its insurance business and obligations relating to the insurance securitization and assets to fund those obligations. A protected cell shall have its own distinct name or designation, which shall include the words "protected cell". The protected cell company shall transfer all assets attributable to a protected cell to one or more separately established and identified protected cell accounts bearing the name or designation of that protected cell. Protected cell assets shall be held in the protected cell accounts for the purpose of satisfying the obligations of that protected cell.

(b) All attributions of assets and liabilities between a protected cell and the general account shall be in accordance with the plan of operation approved by the Director. No other attribution of assets or liabilities may be made by a protected cell company between the protected cell company's general account and its protected cells. Any attribution of assets and liabilities between the general account and a protected cell or from investors in the form of principal on a debt instrument issued by a protected cell company shall be in cash or in readily marketable securities with established market values.

(c) The creation of a protected cell does not create, in respect of that protected cell, a legal person separate from the protected cell company. Amounts attributed to a protected cell under this Article, including assets transferred to a protected cell account, are owned by the protected cell company and the protected cell company may not be, nor hold itself out to be, a trustee with respect to those protected cell assets of that protected cell account. Notwithstanding the foregoing, the company may allow for a security interest to attach to protected cell assets or a protected cell account when in favor of a creditor of the protected cell and otherwise allowed under applicable law.

(d) This Article shall not be construed to prohibit the protected cell company from contracting with or arranging for an investment advisor, commodity trading advisor, or other third party to manage the protected cell assets of a protected cell, provided that all remuneration, expenses, and other compensation of the third party advisor or manager are payable from the protected cell assets of that protected cell and not from the protected cell assets of other protected cells or the assets of the protected cell company's general account.

(e) A protected cell company shall establish administrative and accounting procedures necessary to properly identify the one or more protected cells of the protected cell company and the protected cell assets and protected cell liabilities attributable to the protected cells. It shall be the duty of the directors of a protected cell company to:

(1) keep protected cell assets and protected cell liabilities separate and separately identifiable from the assets and liabilities of the protected cell company's general account; and

(2) keep protected cell assets and protected cell liabilities attributable to one protected cell separate and separately identifiable from protected cell assets and protected cell liabilities attributable to other protected cells.

If this Section is violated, the remedy of tracing shall be applicable to protected cell assets when commingled with protected cell assets of other protected cells or the assets of the protected cell company's general account. The remedy of tracing shall not be construed as an exclusive remedy.

(f) The protected cell company shall, when establishing a protected cell, attribute to the protected cell assets with a value at least equal to the reserves and other insurance liabilities attributed to that protected cell.

(Source: P.A. 91-278, eff. 7-23-99; 92-74, eff. 7-12-01.)

(215 ILCS 5/179A-20)

Sec. 179A-20. Use and operation of protected cells.

(a) The protected cell assets of any protected cell may not be charged with liabilities arising out of any other business the protected cell company may conduct. All contracts or other documentation reflecting protected cell liabilities shall clearly indicate that only the protected cell assets are available for the satisfaction of those protected cell liabilities.

(b) The income, gains, and losses, realized or unrealized, from protected cell assets and protected cell liabilities must be credited to or charged against the protected cell without regard to other income, gains, or losses of the protected cell company, including income, gains, or losses of other protected cells. Amounts attributed to a protected cell and accumulations thereon may be invested and reinvested without regard to any requirements or limitations of Article VIII of this Code (Investments of Domestic Companies), and the investments in a protected cell or cells may not be taken into account in applying the investment limitations otherwise applicable to the investments of the protected cell company.

(c) Assets attributed to a protected cell must be valued at their market value on the date of valuation, or if there is no readily available market, then as provided in the contract or the rules or other written documentation applicable to the protected cell.

(d) A protected cell company shall, in respect of any of its protected cells, engage in fully funded indemnity-triggered insurance securitization to support in full the protected cell exposures attributable to that protected cell. A protected cell company insurance securitization that is not indemnity-triggered may qualify as an insurance securitization under the terms of this Article only after the Director adopts rules addressing the methods of:(i) funding of the portion of the risk that is not indemnity based, (ii) accounting, and disclosure, (iii) risk-based capital treatment, and (iv) assessing risk associated with such securitizations. A protected cell company insurance securitization that is not fully funded, whether indemnity triggered or non-indemnity triggered, is prohibited. Protected cell assets may be used to pay interest or other consideration on any outstanding debt or other obligation attributable to that protected cell, and nothing in this subsection shall be construed or interpreted to prevent a protected cell company from entering into a swap agreement or other transaction for the account of the protected cell that has the effect of guaranteeing such interest or other consideration.

(e) In all protected cell company insurance securitizations, the contracts or other documentation effecting such transaction shall contain provisions identifying the protected cell to which the transaction will be attributed. In addition, the contracts or other documentation shall clearly disclose that the assets of that protected cell, and only those assets, are available to pay the obligations of that protected cell. Notwithstanding the foregoing, and subject to the provisions of this Article and any other applicable law or rule, the failure to include such language in the contracts or other documentation shall not be used as the sole basis by creditors, reinsurers, or other claimants to circumvent the provisions of this Article.

(f) A protected cell company may attribute to a protected cell account only the insurance obligations relating to the protected cell company's general account. A protected cell may not issue insurance or reinsurance contracts directly to policyholders or reinsureds or have any obligation to the policyholders or reinsureds of the protected cell company's general account.

(g) At the cessation of business of a protected cell, the protected cell company shall voluntarily close out the protected cell account in accordance with a plan approved by the Director.

(Source: P.A. 91-278, eff. 7-23-99; 92-74, eff. 7-12-01.)

(215 ILCS 5/179A-25)

Sec. 179A-25. Reach of creditors and other claimants.

(a) Protected cell assets are available only to the creditors of the protected cell company who are creditors in respect of that protected cell and entitled, in conformity with the provisions of this Article, to have recourse to the protected cell assets attributable to that protected cell. Protected cell assets shall be absolutely protected from the creditors of the protected cell company who are not creditors in respect of that protected cell and who, accordingly, are not entitled to have recourse to the protected cell assets attributable to that protected cell. Creditors with respect to a protected cell shall not be entitled to have recourse against the protected cell assets of other protected cells or the assets of the protected cell company's general account.

Protected cell assets are available only to creditors of a protected cell company after all protected cell liabilities have been extinguished or otherwise provided for in accordance with the plan of operation relating to that protected cell.

(b) When an obligation of a protected cell company to a person arises from a transaction, or is otherwise imposed, in respect of a protected cell:

(1) that obligation of the protected cell company shall extend only to the protected cell assets attributable to that protected cell, and the person shall, in respect of that obligation, be entitled to have recourse only to the protected cell assets attributable to that protected cell; and

(2) that obligation of the protected cell company shall not extend to the protected cell assets of any other protected cell or the assets of the company's general account, and that person shall not, in respect of that obligation, be entitled to have recourse to the protected cell assets of any other protected cell or the assets of the company's general account.

(c) When an obligation of a protected cell company relates solely to the general account, the obligation of the protected cell company shall extend only to, and that creditor shall, in respect of that obligation, be entitled to have recourse only to, the assets of the protected cell company's general account.

(d) The activities, assets, and obligations relating to a protected cell are not subject to the provisions of Article XXXIII1/2 (Illinois Life and Health Guaranty Association Law) or Article XXXIV (Illinois Insurance Guaranty Fund), and neither a protected cell nor a protected cell company shall be assessed by or otherwise be required to contribute to any guaranty fund or guaranty association in this State with respect to the activities, assets, or obligations of a protected cell. Nothing in this subsection shall affect the activities or obligations of a company's general account.

(e) In no event shall the establishment of one or more protected cells alone constitute or be deemed to be a fraudulent conveyance, an intent by the protected cell company to defraud creditors, or the carrying out of business by the protected cell company for any other fraudulent purpose.

(Source: P.A. 91-278, eff. 7-23-99; 92-74, eff. 7-12-01.)

(215 ILCS 5/179A-30)

Sec. 179A-30. Rehabilitation and liquidation of protected cell companies.

(a) Notwithstanding any contrary provision in this Code, the rules promulgated under this Code, or any other applicable law or rule, upon any order of rehabilitation, conservation, or liquidation of a protected cell company, the receiver shall be bound to deal with the protected cell company's assets and liabilities, including protected cell assets and protected cell liabilities, in accordance with the requirements set forth in this Article.

(b) With respect to amounts recoverable under a protected cell company insurance securitization, the amount recoverable by the receiver shall not be reduced or diminished as a result of the entry of an order of rehabilitation, conservation, or liquidation with respect to the protected cell company notwithstanding any provisions to the contrary in the contracts or other documentation governing the protected cell company insurance securitization.

(Source: P.A. 91-278, eff. 7-23-99; 92-74, eff. 7-12-01.)